Here’s a look at what the latest inflation data means for markets and investors as of March 11, 2024.
- Headline CPI and Core CPI are very likely to beat the consensus forecast of 0.04 and 0.03 month over month, respectively.
- If this occurs, we will likely see another short-term sell-off as investors panic at the thought of pricing out rate cuts and/or pricing in rate hiking. Like last time, this will be a foolish response and price will rebound shortly thereafter.
- Investors seem to be losing sight of the reality that falling interest rates imply. Rate cuts mean something is broken. Rising inflation, or even more mundane flat inflation as shown by the year over year chart above, means the economy is still strong. Moreover, the Fed tightening cycle is finished, especially considering the rising unemployment rate.
- The immaculate disinflation narrative will continue to play out once this brief reflation ends. Both are risk on.